Critical Review: Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL) and East West Bancorp (NASDAQ:EWBC)

Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL) and East West Bancorp (NASDAQ:EWBC) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, institutional ownership, risk, valuation, analyst recommendations, dividends and earnings.

Dividends

Farmers & Merchants Bank of Long Beach pays an annual dividend of $112.00 per share and has a dividend yield of 1.7%. East West Bancorp pays an annual dividend of $2.40 per share and has a dividend yield of 2.2%. Farmers & Merchants Bank of Long Beach pays out 28.3% of its earnings in the form of a dividend. East West Bancorp pays out 28.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. East West Bancorp has increased its dividend for 8 consecutive years. East West Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

7.6% of Farmers & Merchants Bank of Long Beach shares are held by institutional investors. Comparatively, 89.5% of East West Bancorp shares are held by institutional investors. 12.8% of Farmers & Merchants Bank of Long Beach shares are held by insiders. Comparatively, 1.0% of East West Bancorp shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations for Farmers & Merchants Bank of Long Beach and East West Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bank of Long Beach	0	0	0	0	0.00
East West Bancorp	0	5	8	0	2.62

East West Bancorp has a consensus price target of $116.08, suggesting a potential upside of 7.32%. Given East West Bancorp’s stronger consensus rating and higher possible upside, analysts clearly believe East West Bancorp is more favorable than Farmers & Merchants Bank of Long Beach.

Profitability

This table compares Farmers & Merchants Bank of Long Beach and East West Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bank of Long Beach	11.10%	3.57%	0.42%
East West Bancorp	26.06%	15.09%	1.56%

Volatility and Risk

Farmers & Merchants Bank of Long Beach has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500. Comparatively, East West Bancorp has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500.

Valuation and Earnings

This table compares Farmers & Merchants Bank of Long Beach and East West Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bank of Long Beach	$459.33 million	1.76	$44.88 million	$396.33	17.01
East West Bancorp	$4.53 billion	3.29	$1.17 billion	$8.56	12.64

East West Bancorp has higher revenue and earnings than Farmers & Merchants Bank of Long Beach. East West Bancorp is trading at a lower price-to-earnings ratio than Farmers & Merchants Bank of Long Beach, indicating that it is currently the more affordable of the two stocks.

Summary

East West Bancorp beats Farmers & Merchants Bank of Long Beach on 14 of the 17 factors compared between the two stocks.

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach provides various banking products and services to individuals, professionals, and small to medium-sized businesses in Los Angeles, Orange, and Santa Barbara Counties. It offers checking, savings, Christmas club savings, health savings, market rate savings, and money market accounts; demand and time deposits; certificates of deposit; and individual retirement account. The company also provides personal, home, commercial real estate, real estate and construction, and commercial business loans, as well as lines of credit; financing for residential loans comprising single-family and multifamily loans; and credit and debit cards. In addition, it offers account management, receivables and payables, and risk management services; commercial lending services; and faith-based and healthcare banking services, as well as online and mobile banking services. Farmers & Merchants Bank of Long Beach was founded in 1907 and is headquartered in Long Beach, California.

About East West Bancorp

East West Bancorp, Inc. operates as the bank holding company for East West Bank that provides a range of personal and commercial banking services to businesses and individuals in the United States. The company operates through three segments: Consumer and Business Banking, Commercial Banking, and Other. It accepts various deposit products, such as personal and business checking and savings accounts, money market, and time deposits. The company’s loan products include mortgage and home equity, commercial and residential real estate, working capital lines of credit, construction finance, trade finance, letters of credit, commercial business, affordable housing loans, asset-based lending, asset-backed finance, project finance, loan syndication, and equipment financing, as well as financing services for clients to facilitate their business transactions between the United States and Asia. It also provides various wealth management, treasury management, foreign exchange, and interest rate and commodity risk hedging services; and mobile and online banking services. The company was founded in 1973 and is headquartered in Pasadena, California.